The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, today approved the Ministry of Coal’s proposal to give Central and State Public Sector Undertakings a one-time window to surrender non-operational mines without penalty (forfeiture of bank guarantee) and without citing any reason, according to an official government statement.
This could result in the auctioning of multiple coal mines that the current Government PSU allottees are unable to develop or are uninterested in, as per the current auction policy. The PSUs would be given three months to surrender the coal mines.
Following the Supreme Court’s cancellation of coal blocks in 2014, the government had allotted many cancelled coal blocks to state and central PSUs via the allotment route in order to avoid immediate disruption of coal supplies to thermal power plants. The allocation route was quick, and it was expected that the coal needs of the state GENCOs would be met by those blocks. In contrast to the private sector, which must bid, the revenue share payable by State/Central PSUs is fixed on a per tonne basis.
Given the backdrop of coal block allocation at the time, the time lines for coal block operationalisation were highly strict and hard, leaving no room for the successful allottee or the Nominated Authority to negotiate. Penalties for coal mine delays have resulted in legal battles and disagreements.
45 of the 73 coal mines designated to government enterprises remained non-operational until December 2021, and the due date for the start of mining activities in 19 of them has already passed. Delays were caused by factors outside allottees’ control, such as law and order concerns, expansion of the forest area beyond what was previously stated, and landowner resistance to land acquisition, among other things.
The coal industry is critical to the country’s energy security. After addressing technical obstacles and revising borders, good grade coal blocks that were allocated early can be promptly recycled and offered to interested parties under the recently introduced commercial coal mining auction policy. Early coal block operationalisation will create jobs, increase investment, contribute to the economic development of underdeveloped areas of the country, reduce litigation, and promote ease of doing business, resulting in a reduction in coal imports.
(With inputs from ANI)
first published:April 8, 2022, 6 p.m.